Remedying IRA Contribution and Distribution Errors

The complexity of IRA rules leads to countless opportunities for mistakes. Unfortunately, the noncompliance penalties surrounding retirement contributions and distributions are severe. For 2024, the contribution limits are $7,000 for taxpayers under age 50 and $8,000 for those 50 or older. Overcontributing can lead to a six percent excess penalty that is charged annually until the taxpayer withdraws the excess contribution. If not corrected, the penalty could exceed the amount of the contribution.

Common distribution errors include missed RMDs. Generally speaking, a taxpayer must begin withdrawals from SIMPLE IRAs, SEPs, and other retirement plans at age 72 or 73 if you turn 72 after Dec. 31, 2022. The SECURE 2.0 Act graciously reduced the penalties on overlooked RMDs from 50 percent to 25 percent and, in some instances, to 10 percent.

There are steps taxpayers, and their advisers can take to correct past errors and minimize or negate the stiff penalties surrounding retirement plan errors. For example, Form 5329, Additional Taxes on Qualified Plans (including IRAs), is used to report required excise penalties but can also be used to request a waiver for excise charges on missed RMDs. Additionally, the IRS offers a self-certification process for taxpayers who miss the 60-day rollover window for retirement contributions. Individual taxpayers who contribute to retirement plans and their advisers must understand the relief available to eliminate or mitigate the severe penalties assessed for failing to meet the required IRA requirements for distributions and contributions.

Listen as Larry Pon, CPA/PFS, CFP, EA, USTCP, AEP at Pon & Associates, provides examples of correcting common errors made when contributing and withdrawing money from retirement accounts.

1. IRA contributions and withdrawals: introduction
2. SECURE Act's impact on IRAs
3. Common errors and corrections
   1. Overcontributing
   2. Missed rollover deadlines
   3. Missed RMDs
      1. Age 72/73
      2. Inherited IRAs
   4. Penalties
   5. Penalty relief

The panelist will cover these and other key issues:

• Steps to remedy and report overcontributions to IRAs
• IRS self-certification process for missed rollover deadlines
• Preparing Form 5329 to ask for a penalty waiver
• The impact of SECURE Act 2.0 on IRA contributions and distributions

Learning Objectives

After completing this course, you will be able to:

• Identify proven methods to mitigate penalties charged for missed or late IRA distributions
• Determine the RMD requirements under SECURE 2.0
• Decide who qualifies for the IRS self-certification program for late rollovers
• Ascertain how to apply for a penalty waiver for a late RMD

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of individual income taxation, including itemized deductions, individual income tax credits, net operating loss limitations including carrybacks and carryforwards.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).